The Taxation System in Saudi Arabia
The taxation system in Saudi Arabia is relatively new, as the country only introduced taxes in 2018. The system is regulated by the General Authority of Zakat and Tax (GAZT), which is responsible for collecting and managing taxes in the country.
Individuals who are employed in Saudi Arabia are subject to income tax, which is calculated based on their income. The income tax rate ranges from 0% to 20%, with higher rates applied to higher incomes. In addition to income tax, employees also pay social security contributions, which are deducted from their gross salary. The social security contributions are used to fund the Saudi social security system, which provides benefits such as health insurance, disability benefits, and retirement pensions.
Companies operating in Saudi Arabia are subject to corporate income tax, which is also calculated based on their income. The current corporate income tax rate is 20%.
Double Taxation Agreements in Saudi Arabia
Saudi Arabia has signed double taxation agreements with more than 50 countries around the world. These agreements are designed to prevent individuals and companies from being taxed twice on the same income. They also provide rules for determining which country has the right to tax specific types of income.
For example, if a Saudi resident is working in another country and earning income there, the double taxation agreement will determine whether the income should be taxed in Saudi Arabia, in the country where the work is being performed, or both. In general, the agreement will provide a credit for taxes paid in the other country to avoid double taxation.
Main Taxes Expats Need to Be Aware Of
As an expat working in Saudi Arabia, there are several taxes that you need to be aware of. The main ones are:
Income Tax: As mentioned earlier, income tax is calculated based on your income and ranges from 0% to 20%. If you are employed in Saudi Arabia, your employer will deduct income tax from your salary and pay it on your behalf.
Social Security Contributions: As an employee, you will also be required to pay social security contributions, which are used to fund the Saudi social security system. The current rate is 9% of your gross salary.
Value Added Tax (VAT): If you are running a business in Saudi Arabia, you will need to register for VAT and charge it on your goods and services. The current VAT rate is 15%.
There are also several tax breaks that could apply to expats, depending on their specific situation. For example, if you are a foreign investor in Saudi Arabia, you may be eligible for a reduced tax rate or a tax exemption on certain types of income.
Filing a Tax Return in Saudi Arabia
As an expat working in Saudi Arabia, you may be required to file a tax return each year. If you are an employee, your employer will deduct taxes from your salary and pay them on your behalf. However, if you have additional income or deductions, you may need to file a tax return to report them.
The deadline for filing a tax return in Saudi Arabia is typically April 30th of the following year. If you are filing a tax return for the first time, you will need to register with the GAZT and obtain a tax identification number.
Tax Exit Procedures for Leaving Saudi Arabia
If you are planning to leave Saudi Arabia and move abroad, there are certain tax exit procedures that you need to follow. The first step is to notify the GAZT of your departure and settle any outstanding taxes or fees. You may be required to obtain a tax clearance certificate to prove that you have settled all taxes and fees.
If you are a business owner, you may be required to submit a final tax return and settle any outstanding tax liabilities before leaving Saudi Arabia.
It is important to note that if you own any property in Saudi Arabia, you will still be subject to property taxes even if you are no longer a resident. You will also need to continue to file tax returns in Saudi Arabia if you have any income from Saudi sources.
The taxation system in Saudi Arabia is relatively new, with income tax and corporate income tax introduced in 2018. Expats working in Saudi Arabia should be aware of their tax obligations and potential tax breaks. When leaving Saudi Arabia, it is important to follow the tax exit procedures to avoid any potential tax liabilities. The double taxation agreements that Saudi Arabia has signed with more than 50 countries can provide relief for individuals and companies who are working and earning income in multiple countries.